Davidson Company was started on May 1, 2021 by Jane Davidson. Using the adjusted account balances below, prepare IN GOOD FORM the Income Statement, Owner’s Equity Statement and Balance Sheet for the month completed May 31, 2021. ***Be very careful with the information, as the accounts are provided in alphabetical order. You must prepare the Financial Statements with the appropriate accounts, in the appropriate order. Advertising Expense 6,000 Accounts Payable 9,000 Accounts Receivable 15,400 Accumulated Depreciation: Equipment 8,000 Cash 10,300 Commissions Revenue 12,000 Depreciation Expense 14,000 Equipment 36,000 Insurance Expense 3,200 Interest Expense 2,800 Interest Payable 1,000 Notes Payable 12,000 Prepaid Insurance 2,600 Rent Expense 3,000 Salaries Expense 39,000 Salaries Payable 7,500 Service Revenue 78,000 Owner’s Capital 20,000 Owner’s Drawing 10,000 Supplies 2,500 Supplies Expense 5,700 Unearned Revenue 5,000 Utilities Expense 2,000
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Davidson Company was started on May 1, 2021 by Jane Davidson. Using the adjusted
account balances below, prepare IN GOOD FORM the Income Statement, Owner’s Equity
Statement and
***Be very careful with the information, as the accounts are provided in alphabetical
order. You must prepare the Financial Statements with the appropriate accounts,
in the appropriate order.
Advertising Expense 6,000
Accounts Payable 9,000
Cash 10,300
Commissions Revenue 12,000
Depreciation Expense 14,000
Equipment 36,000
Insurance Expense 3,200
Interest Expense 2,800
Interest Payable 1,000
Notes Payable 12,000
Prepaid Insurance 2,600
Rent Expense 3,000
Salaries Expense 39,000
Salaries Payable 7,500
Service Revenue 78,000
Owner’s Capital 20,000
Owner’s Drawing 10,000
Supplies 2,500
Supplies Expense 5,700
Unearned Revenue 5,000
Utilities Expense 2,000
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